Tutorial Guidance on how much to charge

Garry Edwards

Garry Edwards

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Guidance on how much to charge - Guidance on how much to charge

There's quite a few posts asking how much to charge and it's very difficult to give a helpful answer, simply because there are too many variables at play.
But I thought it might be helpful to post the following small extract from my Professional Photogaphy Manual
Unfortunately if you want to read the other 100 pages you'll have to buy it;)

Perhaps this post could be a sticky?

How much should...
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Read more about this resource...
 
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Great post. There has been quite a few people asking about this, and you've answered it very well.
Thanks
 
Interesting read. Thank you.
 
Excellent post. Could be made a sticky maybe?
 
Chewing Gum applied.

Thanks very much :)
Nice informative post. I'm sure it'll help a few people out!
 
just joined today and learned my first few lessons within minutes. In all seriousness though, what a great post.
 
Excellent post. Just the sort of thing I was looking for. Page now bookmarked (y)
 
Also, stick to the NUJ rate card for photographers, or at least use as a guide.(y)
 
Garry there's some sound advice in there but I take issue with this:

The true answer is that you should charge what people are prepared to pay.
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In isolation this is fundamentally wrong and therefore it's misleading to show it as a single truth in large bold letters.

The single most important thing about pricing in business is to cover all costs and to have a large enough margin to earn profit. Unless you have a firm understanding of costs and what a decent profit looks like then pricing to the market is setting yourself up for a fall.

The first question anyone wanting to charge for products and services is a clear vision of why they want to charge. Do they only want to cover costs/materials and see it as a learning curve? Do they want to do a mate a favour? Do they want to set up an established business which will grow to be their sole source of income?

The next question absolutely has to be what cost will they incur. Without a clear understanding of what money is going out of the business any pricing decisions are based on a wing and a prayer. Far too many sole traders in all kinds of businesses break their backs and their hearts working all the hours they can for the same amount they could have earned in a low skilled job for half the number of hours work. Understanding how much you need to bring in to make it worthwhile will help you understand whether or not you can sell your product/services competitively in the first place, a much better route than adjusting the price to the market and then finding out months down the line when your overdraft is building that you're not making any money.

For many members here, photogrpahy is a hobby that they'd love to earn a bit of money from to buy a bit of extra kit but it doesn't go beyond that. For them, most of the below isn't really relevent, but for the few who really want to make a go of becoming a photogrpaher (or going into business in any way) there a three key aspects to know inside out, back to front and every which way but loose.

The true answer is that to be a success in any business you have to have a full understanding of three things 1) Product 2) People 3) The Numbers.

1) Product
Your product may not be the best, it may not be the cheapest, but by understanding it fully you can exploit it to it's full potential. Think of BetaMax, far better than VHS, but which solution came to dominate the VCR market? Product knowldge also includes knowing about the market. As Garry says, you have to know the market rates for your product, where your product sits within the market, and who your competitors are (and don't think competition is just other photographers either, anything which may tempt your potential customers' away from you is competition)
2) People
You have to understand people. Even you you only shoot landscapes, it's people who buy your shots. If you don't understand them you won't know how to sell to them. You have to know who your target audience is and what is going to make them choose you. You have to be able to tell a time waster from a genuine potential client so you know who to concentrate your time on. You have to understand how to get the most revenue out of a customer while still ensuring that they're happy with the deal. You have to know when to push and when to step back. Sales is all about people.
3) Numbers
The best people all have one thing in common - they know their numbers. Watch Dragon's Den. The first thing they want to know is the numbers. If the numbers aren't there then there's no point delving deeper. You have to know your numbers inside out. You have to know when a deal simply isn't worth doing, sometimes the best deals are the ones you walk away from. I work in Sales. 80% of my revenue comes from 20% of my customers. If I don't know who those customers are, and then know them inside out, I can't sell more to them and I can't guarentee that I'll keep them as customers at all.

At the end of the day, you can put the money you'd have to spend on kit in the bank and earn 4% interest, if you don't have the money and you have to borrow, you're paying out from the word go, the value of your kit is depreciating day on day and after three years will be worth a fraction of what you paid for it and finally you can get a job on minimum wage for £5.73/hour so you'd want to earn more from all your hard work than that. If you don't charge enough to cover all of the above then unless you're doing it for charitable reasons give up.
 
NorthernNikon said:
Garry there's some sound advice in there but I take issue with this:



In isolation this is fundamentally wrong and therefore it's misleading to show it as a single truth in large bold letters.
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You've made some very good points but I stick with my headline advice.

Firstly, because the price that the market will bear is the only sensible pricing basis. Your explanation works well with any bought-in product, e.g. a can of baked beans, we all know the pricing options with that kind of product (pile 'em high & sell 'em cheap, get high volumes but with low markups and high handling/warehousing costs, go the other extreme or somewhere in between) but this doesn't apply to photography in the true sense. It's a professional service (OK some people are more pro than others) and the cost of materials and equipment is minimal compared to most other small businesses. As an example, I bet most new pro photographers have less than £20K tied up in capital equipment. Even a one-person van delivery service has to spend that much on a Tranny van.

Secondly, my tutorial is written with the expectation that the people who buy it do want to run a viable business. Of course, plenty of my readers have no ambition to work as full time photographers but that doesn't change my advice or its basis.

As for your advice on borrowed money, I agree 100%. What you have in my post is a tiny extract from a 101 page A4 tutorial. In it, I state very clearly that it's a very bad idea to borrow money, and I also state that it's a very bad idea to buy anything at all until there's a proven need for it.
 
I'm not disputing that you whole guide may go into further detail, but you cannot claim that pricing to the market is sound business advice. Cap Ex is only the start of it, what about Op Ex? What about how much the photographer needs to earn once Cap Ex and Op Ex have been covered to maintain a basic standard of living? Don't forget tax.

You have to know what your break even point is before you look to set pricing. Your break even point may be low, but unless you know how low it is you've nno idea about what kind of discounting you can offer, what budget you may have spare for marketing and promotion.

Everything has to start from knowing your costs. Once you know then then I wholeheartedly agree that you have to price, not to the market, but with an eye on the market. Because you know your costs, you'll know whether the venture is viable or not, because you know your costs you know whether you can undercut the current competition, either because your particualrly lean, or because you're in an area where there is only one competitor who has got greedy.

This doesn't just apply for a business as a whole, but should apply on a job by job basis. Say you were offered half a day's shoot in London for £150. Say this is £50 above the market rate. Sounds great, but if it will cost you £50 in petrol to get there and back suddenly the fee is 2/3 what is was and not so appealing. Now if you know what you other costs are you can work out whether it is worth taking the job or whether actually you'd only be earning £20 for a whole day (don't forget the time taken to travel) and perhaps you'd be far better employed calling potential customers or handing out flyers or filing your tax return.
 
With respect, I think you're going off at a bit of a tangent here.
Obviously, every job needs to pay, there's no point in operating at a loss. There may be 'jobs' that only the very best photographers can make pay (for example shooting model portfolios) that are simply not worth doing at the general market rate, but this isn't the sort of 'job' I was talking about. I gave examples of wedding and portrait pricing.

You mention travelling time and travelling cost as factors that reduce the profitability of jobs. Not so in my experience. I charge for mileage @ 50p per mile and although I don't specifically charge for travel as an invoice entry it comes out of the day, i.e. if there's 2 hours travelling each way then the client is getting 4 hours of photography instead of 8, so is paying for my travelling time. The market will normally bear that simply because the client has asked for a specific photographer to travel to wherever the job happens to be rather than hire a local photographer.In the small minority of cases where a client isn't prepared to pay for travelling time/cost then I advise them to hire a local photographer, I certainly don't undercut my own prices to get the work, because charging what the market will bear involves charging a rate similar to that which most competitors of a similar standard charge, not charging a rate that tightfisted clients are willing to pay.

Charging the market rate works in the other direction too. If I don't happen to have the required kit (say a wideangle lens) then I have a choice. I either borrow or hire that lens at my own expense or I turn down the job. It isn't the client's fault if I don't have the tools I need and I would never charge them extra for hiring in the tools I need for the job.
 
Garry Edwards said:
With respect, I think you're going off at a bit of a tangent here.
Obviously, every job needs to pay, there's no point in operating at a loss.
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With all due respect Garry, it's not a tangent, it's critical because how can you know if you're operating at a loss if you don't know your costs? And all too many businesses, both small and large, have found to their costs that actually it isn't all that obvious.
 
I have to say that in my opinion both of you are correct.

You have to know your market and price accordingly.

You have to know your costs and price accordingly.

The two are not exclusive.

I shoot few weddings but the ones I do I want to make a profit on and I want to be competitive. In my local market there are a few of the 'shoot at any price I just want to shoot a wedding', I ignore these (maybe at my peril but I ignore them). The typical wedding shooter locally is charging £800 to £1500 and the higher end is charging £1500 to £2500. Most of these include a second shooter/assistant and include an album of varying quality.

I work from home and my base costs (including insurance, electric, internet, web space, car, cameras, lenses etc.) are £59 per day based on a 4 day 48 week year. My capital costs, equipment replacement cycles and variable costs are spread sheeted and I can track my costs and very accurately identify my base costs. The average salary in the UK is £24k. Too earn the average I need to bill £59 (base costs) plus £115 (salary) ie. £174 per day (minimum) for 4 days a week. To this I need to add a margin to cover sickness, expansion, unexpected costs etc. I use 20% to 25% generally giving me a minimum day rate charge of £235 (I add a bit to try to take me above the average). To this I add any job specific costs (prints, etc) and mark-up these appropriately. A typical wedding is 4 days work for me including initial meetings, equipment prep, site visit (if needed), day of the wedding, back-up of images, PP of images, presentation to the client. Therefore I look to bill in the order of £1000 per wedding excluding albums and large prints. This is in line with the local market.

If your local market cannot support your cost base and salary requirement then you will go backwards. If your local market can support a higher charging structure then you should charge appropriately.

Your costs, what you charge and what the market will pay have to balance and that is why I believe both of you have a valid point.

John
 
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John, you're absolutely right, the two aren't mutually exclusive, but Garry and I are disagreeing about when price should be calculated. Yours is a perfect example of my argument, that you've calculated what you need to bring in to cover your costs and give you your desired earnings and then you've looked to see how that will fit in with the local market rates so that you price accordingly. I agree with most of what Garry has said but I still take issue with his "single truth" of pricing to the market with no other consideration to costs.
 
Hmmn... Interesting arguments that should help newcomers to take a long, hard look at their actual costs. John's cost calculations seem to me to be based on the assumption that he will shoot 48 weddings per year and earn zero from any other kind of work... Or maybe that's just an assumption on my part.

At the end of the day, of course a photographer (or any other business person) needs to know the minimum viable sale price - but that doesn't change my belief that prices need to be based only on what the market will bear. The reality of sales in any industry is that market forces, not costs, dictate price points e.g. there may be 2 separate items, each sold at a price point of £199.99. One 'should' be sold for £181.71 but will be sold for £199.99 because it can sell at that price and the other 'should' be sold for £203.44 but will be sold at £199.99 simply because sales will be much better below the £200 price point and because there is sufficient margin to do so. That doesn't mean that if the product costs £300 it should still be sold at £199.99, I've never said that.
 
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I shoot two weddings a year. I try to separate business client work from private client work. The primary focus of the business is architectural photography and art work photography. Mainly images of prints and paintings for books, catalogues etc. and work commissioned by architects or manufacturers. As these are both relatively specialised areas and both can be technically very challenging they usually require a considerable amount time in set up, client discussion/involvement and PP and I am able to charge a fair premium over my private rates.

This does raise another factor in the price equation. A superior product can usually attract a superior price. The product may be superior to your competitors for many reasons. For myself, customer service is a key factor and clients pay for this. However, this again is market dependent. In my spare time I shoot a lot of football, mainly for a local team. The sports market is an incredibly hard market to actually make money from. My product is generally better than others shooting local football but it sells poorly. Even when priced below other local photographers image sales are poor. I accept this and also accept that this part of my 'work' is done for other reasons. It is also partly a networking exercise as I meet a significant number of senior local business people through this. The phrase 'spare time' is a bit of a contradiction when you work for yourself :) Sometimes, whatever the price, the market is just not there for your product.

John
 
Fantastic read, and a lot of wonderful pointers.

I have to say, personally, I am a person who loves number; as such, I would tend to agree with NorthernNikon on the matter of getting the costing sorted out first.

However, in my experience with lending (for a large UK bank) I've found that a lot of the small, and newly established business, are going head-first into the business without any clue as to what the numbers really are; and when discussing that with the business owner, this tends to move them away from wanting to go ahead. On the flip-side, I have seen a lot of business, with a failed business plan, become a good success. Point is, the numbers give a good indication, but they are not as accurate as they are supposed to be.

Still, it is vital to get them worked-out, while being very prudent so as, at least, to know what to expect.

On the flip side of all that ... how one market the service on offer depends on what pricing strategy really one wants to apply .... this is the best, and clear statement to that ....



NorthernNikon said:
......


The first question anyone wanting to charge for products and services is a clear vision of why they want to charge. Do they only want to cover costs/materials and see it as a learning curve? Do they want to do a mate a favour? Do they want to set up an established business which will grow to be their sole source of income?


.....
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sorry that I cut a lot off that post


Also important to think of what other options are out there, the price of "missed opportunity"?
Say you work for an investment bank (in the good old days) and earned £8,000 a month, plus full medical insurance for yourself and family, private education for the kids (up to 2 kids), a bonus of 0.001% of my portfolio under management etc. etc. Work out the cost of all that, how much would it cost you to provide exactly the same amount of financial remuniration. Now, that is your lost opportunity. That is your break-even point. Anything less, would be a loss (from a financial point of view).

That all has to go into the equation as to how much you should be charging. Afterall, what is the point of doing photography for a business with you taking 100% of the business risk, when you can earn so much more (multiple times more) with a lot less business risk to yourself? Knowing your own market value is the key to seeing if this is going to be a viable business or not, at least so that you know how much you may be willing to “lose” / gain.

Put that into the formula of all the head’s-up given in earlier posts and you will get a clear and better understanding of what sort of photography you want / can do, and accordingly adjust your stragety.
 
Amazingly helpful. Thanks very much.
 
There are several sides of this equation

Making the assumption you are charging to make a living...
A. You need to charge enough to make a living
B. You need to charge between the credible upper and lower market thresholds for your product

Getting the balance right may mean there is no place for a humble portrait photographer to live in the poshest street in london, as they just wont earn enough. So if you live there, you will either have to move or do somethiong else.

There are definatally 3 mentalities on the high street. Stack em high, sell them cheap. Sell expensive and charge for exclusivity. Mix it a bit - go for the middle ground, and stretch up when you can, and down when you need to

What garry says is correct about "what people are prepared to pay". There are one or two caveats with that

1. Skillful selling will alter that ammount
2. Customer education may alter that ammount
3. Some are prepared to pay more or less than others, which then brings "market placement" into the mix
4. What people are prepared to pay may not = a living
 
This was extremely helpful to me as i'm looking to start making money from my photography very soon, thanks a lot!
 
First time I've actually read that top to bottom, and it's certainly interesting reading! Thanks for an informative post Garry.
 
Great thread ... I have to agree with NorthernNikon, understanding your cost base is fundamental. Yes price to market but if you do not know your cost base you do not know your profit and then you are running with unacceptable business risk.

Even not for profits must know what to charge vs what their costs are.

It is not hard, so do the sums and sleep soundly.
 
will69 said:
Great thread ... I have to agree with NorthernNikon, understanding your cost base is fundamental. Yes price to market but if you do not know your cost base you do not know your profit and then you are running with unacceptable business risk.

Even not for profits must know what to charge vs what their costs are.

It is not hard, so do the sums and sleep soundly.
Click to expand...


The point I was trying to make was that people should base their prices on what the market will bear, not on their costs. But obviously it is essential to know what the costs are before making any pricing decisions.

I remember, many years ago, a 'success story' that involved selling huge quantities of an exercise machine, ideal for masochists, via off the page ads. This Company was hailed as an example of good practice - but they went bust because they had miscalculated their costs...
 
How much should I charge for doing a 2 day wedding event? It includes a rehearsal dinner, the wedding itself the after wedding party etc...
 
Thanks for this extremely useful post Garry, I am just starting out, and there are great pointers. I agree with some of NorthernNikon's comments, but photography is very different to retail sales, and the philosophy of "buyer perceived value" applies more to artistic trades.
 
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